The Maryland Governor signed legislation on Thursday which would require the payment of premium tax based on 100% of the premium when Maryland is the home state. The bill also will require the Insurance Commissioner to conduct a study of the approaches taken by other states to implement the NRRA.
Maryland is the 21st state to pass NonAdmitted and Reinsurance Reform Act related implementation legislation and during the session. NAPSLO provided draft legislation and worked with a local member to provide testimony on the issue.
The NRRA mandates that beginning July 21 the insured's home state will be the only state with jurisdiction over surplus lines transactions and the only state that can require a tax be paid by the broker. As a result states are working to bring their laws into compliance.
Maryland's bill requires the payment of premium tax at the Maryland rate and based on 100% of the premium when Maryland is the home state. In addition, the Commissioner is required to conduct a study of the approaches taken by other states to implement the NRRA, paying particular attention to action taken by contiguous states, and issue a report of findings to the Senate Finance Committee and the House Economic Matters Committee by the begining of next year.
The report must include information regarding relevant legislative enactments; execution of relevant agreements or compacts; the impact on state premium tax revenues (for Maryland and other states); future plans for implementation and relevant guidance from Congress; the industry and various industry organizations (e.g., NCOIL, NAIC).
The bill would require brokers and insureds to provide an allocation report in a form and subject to deadlines to be established by regulation. The bill generally incorporates the exempt commercial purchaser (ECP) exemption and home state exclusive regulation mandates of the NRRA, by cross-referencing the specific statutory definitions of an ECP and "home state" from the NRRA rather than incorporating the definitions into Maryland law.
The bill generally adopts the NRRA insurer eligibility standards, but retains authority for the Commissioner to prohibit placements with an insurer that "is not in a safe or solvent financial condition" or "has refused to pay just claims," and to impose other eligibility requirements that are preempted by the NRRA. The home state exemption from the surplus lines broker licensing requirement is conditioned on the broker being licensed in the insured's home state, which condition is preempted by the NRRA.